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Energy Law Exchange

June 1, 2012

Courts Reject Post-Deepwater Horizon Environmental Challenges

Soon after the Deepwater Horizon oil spill in the Gulf of Mexico, environmental groups launched wide-ranging challenges to all phases of offshore oil and gas exploration and development. They filed lawsuits against the Department of the Interior seeking to halt lease sales, cancel exploration plans, and even rescind permits for seismic surveys in the Gulf, at least until years-long environmental reviews were completed under a number of individual statutes--the National Environmental Policy Act (NEPA), the Endangered Species Act (ESA), the Marine Mammal Protection Act (MMPA), and the Outer Continental Shelf Lands Act (OCSLA). The environmental groups filed cases relating to ongoing Gulf of Mexico operations in the Fifth and Eleventh Circuits and in district courts in Louisiana, Alabama, and the District of Columbia. Two of these cases have now reached final decision.

The first of these cases involves agency approvals of lease sales that began shortly before and continued during and after the Deepwater Horizon incident. The Bureau of Ocean Energy Management (BOEM) had issued the leases without having concluded environmental reviews of the specific impacts of the Deepwater Horizon spill. The court in Defenders of Wildlife v. Bureau of Ocean Energy Management, Regulation and Enforcement, 2012 WL 1640676 (S.D. Ala. May 8, 2012) held that such environmental reviews were not required under either the ESA or NEPA before BOEM issued the leases.

The court concluded that Congress decision to split offshore exploration and development into four distinct phases under OCSLA meant that environmental reviews of an incident relating to later (drilling) phases should not impede agency actions relating to earlier (lease sale) phases. The court noted that BOEMs approval of lease sales did not allow the lessees to commence drilling operations, for example, without additional agency approvals.

The second case involves challenges under NEPA to later phase agency approvals of exploration plans and development operations. The Fifth Circuit in Gulf Restoration Network, Inc. v. Salazar, 2012 WL 1943636 (5th Cir. May 30, 2012) dismissed a number of consolidated challenges on grounds that the environmental groups had failed to participate in the underlying administrative proceedings as required by OCSLA for such challenges.

OCSLA Phases

Congress under OCSLA prescribed a sequence of four distinct statutory stages to developing an offshore oil well: (1) formulation of a five year leasing plan by the Department of the Interior; (2) lease sales; (3) exploration by the lessees; (4) development and production. Defenders of Wildlife, 2012 WL 1640676 at *1 (quoting Secretary of the Interior v. California, 464 U.S. 312, 337, 104 S.Ct. 656, 78 L.Ed.2d 496 (1984)). A reason for this four part division was to forestall premature litigation regarding adverse environmental effects that all agree will flow, if at all, only from the latter stages of OCS exploration and production. Id. (quoting Secy of Interior, 464 U.S. at 341).

Lease Sale 213

Bidding on Lease Sale 213 in the Gulfs Central Planning Area began in March 2010, a month before the April 20, 2010 Deepwater Horizon incident began. Yet all but 27 of the 358 Lease Sale 213 bids were formally accepted and processed by BOEM over a several-month period after the start of the incident. It was not until after all of the Sale 213 leases were issued that BOEM reinitiated consultations with the National Marine Fisheries Service (NMFS) and the U.S. Fish and Wildlife Service (FWS) pursuant to the ESA (in July 2010), and began to prepare a supplemental environmental impact statement relating to Central Gulf operations pursuant to NEPA (in November 2010).

In May 2010, the Department of the Interior had issued a moratorium on deepwater drilling operations, which was revised and extended in July 2010 after a court found that the initial moratorium was improperly issued. In October 2010, BOEM issued extensive new drilling safety regulations and thereafter announced that the drilling moratorium was being lifted.

ESA Claim Directed at Lease Sale 213

The district court rejected Defenders of Wildlifes claim that the ESA prevented BOEM from relying on allegedly stale NMFS/FWS consultations in issuing the Sale 213 leases. Section 7(a)(2) of the ESA obliges federal agencies to insure that their actions are not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of [critical] habitat of such species. 16 U.S.C. 1536(a)(2). The court noted that [s]ection 7(a)(2)s requirements unquestionably apply to conduct such as BOEMs approval of leases for oil and gas drilling on the OCS. 2012 WL 1640676 at *7. The court also noted that section 7(a)(2) requires that agencies consult with the FWS [and/or NMFS] to determine the effects of their actions on endangered or threatened species and their critical habitat. Id. (quoting Florida Key Deer v. Paulison, 522 F.3d 1133, 1138 (11th Cir. 2008)). However, the court rejected the contention that BOEM was categorically barred from taking any action with respect to Lease Sale 213 until after the reinitiated consultations concluded. See id. at *10. The court noted, for example, that section 7(d) of the statute provides that [a]fter initiation of consultation , the Federal agency and the permit or license applicant shall not make any irreversible or irretrievable commitment of resources with respect to the agency action which has the effect of foreclosing the formulation or implementation of any reasonable and prudent alternative measures. Id. (quoting 16 U.S.C. 1536(d)). According to the court, under 7(d), an agency is not forbidden from taking all action while consultation is underway, but is simply barred from irreversibly or irretrievably committing resources during that interval. Id. at *10. The court found that issuing leases did not irretrievably commit resources within the meaning of the ESA. See id. at *11 (stating that [n]othing in BOEM's mere approval of bids could reasonably be viewed as constituting an irreversible or irretrievable commitment of resources.).

Nor could a lease sale in the absence of new agency consultations following the Deepwater Horizon incident violate section 7(a)(2)s proscription against actions likely to jeopardize a listed species or critical habitat. Although certain preliminary activities such as conducting various seismic surveys are permitted when a lease is issued, and although such activities might, in certain circumstances jeopardize a listed species, information that would be reviewed during agency consultations relating to the Deepwater Horizon incident would not be not relevant to such preliminary activities. Id. at *13. Accordingly, past NMFS/FWS consultations that had dealt directly with the various preliminary activities were unaffected by the incident.

NEPA Claim Directed at Lease Sale 213

The court similarly rejected Defenders of Wildlifes claim that BOEM was required to prepare a supplemental environmental impact statement (SEIS) before issuing the Sale 213 leases. The court found that nothing about the April 2010 oil spill suggests that the issuance of leases for Lease Sale 213 (or the preliminary activities authorized to the lessees by virtue of the approval of their bids) will affect the human environment in a significant manner or to a significant extent not already considered, as would be necessary to mandate preparation of a SEIS before the leases may issue. Id. at *18.

Indeed, the court observed that BOEM has since completed an SEIS covering the Central Planning Area and any BOEM authorization to conduct drilling operations under Lease Sale 213 will be informed by that SEIS. Id. at *16.

NEPA Claims Relating to Exploration Plans and Development Operations

OCSLA requires that any challenge to agency approval of any exploration plan or any development and production plan is subject to review only in a court of appeals in which an affected State is located. 43 U.S.C. 1349(c)(2). OCSLA further provides that judicial review shall be available only to a person who participated in the administrative proceedings related to the agency actions. Id. at 1349(c)(3).

The Fifth Circuit recently dismissed challenges by Gulf Restoration Network, Sierra Club, and Center for Biological Diversity to BOEMs approval of sixteen exploration plans and development operations coordination documents (DOCDs) approved between March 29 and May 20, 2010, before and just after the Deepwater Horizon incident. Petitioners had alleged that the approvals, which relied on categorical exclusions from NEPA review, violated both OCSLA and NEPA. The Fifth Circuit ruled that the challenges must be dismissed because Petitioners failed to exhaust their administrative remedies by not participating in the underlying administrative proceedings.

The court initially affirmed its jurisdiction to review DOCDs, in addition to exploration plans, finding that DOCDs are a modified form of development plans for which OCSLA expressly provides appellate review. The court also found that OCSLAs provision allowing judicial review to be available only to persons who participated in the administrative proceedings is not a jurisdictional requirement. However, the court found that Petitioners did not demonstrate that their failure to exhaust administrative remedies was excusable. Indeed, even though one of the plans had been approved before it was posted on the agencys website, the court concluded that Petitioners inaction as to other plans and DOCDs showed they would not have participated even if that plan had been posted. Petitioners had made no attempt to show otherwise.